Five themes played out throughout the responses received for this year's Top 200 listing: growth; industry consolidation; concerns about the cost of copper and other base metals; attracting, training and keeping good people; and the 2008 economic outlook.

Last year was a banner year for electrical distributors who made this year's Top 200 listing, as sales for the group as a whole increased 14.9 percent to $51.7 billion. This followed the increase for Top 200 distributors of 15.1 percent in 2005 and 14.9 percent in 2004.

The top five reasons for 2006 sales increases were, in descending order, a good business climate, market share increases, price spikes, internal growth or operating strategies and acquisitions. Many companies increased their sales by taking market share from competitors, and others said they grew through acquisition or starting up new branches. Steve Bellwoar, president, Colonial Electric Supply, King of Prussia, Pa., said his company continues to post double-digit increases with a multi-faceted growth strategy.

“We are moving forward on a plan to increase our sales by 10 percent per year for 10 years straight,” he said. “We have achieved this every year through acquisitions, adding people and start-ups.”

With sales up, many Top 200 electrical distributors reinvested in their businesses. At American Electric Supply Inc., Corona, Calif., Mike Pratt, president, redesigned the company's warehouse operation to increase efficiency. “We installed the ‘Route View’ system to manage our truck fleet and saved considerable operational dollars,” he said.

Schaedler Yesco Distribution Inc., Harrisburg, Pa., invested in a new corporate headquarters and a new branch. Matt Brnik, the company's president, was busy opening a new branch in conjunction with a plumbing/HVAC distributor and a PVF distributor, and relocating the company's central distribution center and corporate headquarters into a totally remodeled 150,000-square-foot facility.

At least one electrical distributor made an aggressive move into the energy market. Dickman Supply Inc., Sydney, Ohio, added an EPAct specialist to help customers earn tax incentives with lighting upgrades. John Maltby, president, Maltby Electric Co. Inc., San Francisco, also saw growth in the energy market and said the construction of wind farms and commercial solar installations were a big boost to his company's sales in 2006.

Many electrical distributors have invested in new computer systems, but none on so large a scale as Graybar Electric Co., St. Louis. The company installed an SAP system several years ago, and that system paid dividends in 2006, according to Richard Offenbacher, the company's senior vice president of sales and marketing. “The recently implemented ERP system is generating increased productivity and allowing for quicker reactions to market conditions,” he said.

The industry's largest electrical distributors are gunning for big-time growth in 2007, too. According to respondents for Electrical Wholesaling's annual survey for the Top 200 listing, the economic party is not quite over in the electrical market. Many respondents were surprisingly bullish about their sales prospects for 2007. Of the respondents who offered a sales projection in the online survey, 35 percent forecast a sales increase of 10 percent to 15 percent, and approximately one-quarter expect their sales to increase 6 percent to 9 percent. Six respondents said their sales would increase by 16 percent or more. While you must factor in several percentage points of price inflation due to the continued cost increases in copper, steel and other base materials, as a whole electrical distributors expect a strong 2007 (Check out the chart on page 32 to get a sense of what Top 200 distributors are thinking about increases in copper price for 2007.)

Several respondents with sales increases in the 10 percent range said half their sales increases were related to the surge in copper prices, and the other half came from real growth. While the Top 200 survey did not ask respondents for their 2008 forecasts, most industry observers are expecting a cyclical decrease in market conditions.

Despite the good economic news, electrical distributors apparently have plenty of worries keeping them up at night. When asked about the biggest threat to their profitability over the next five years, their concerns included a softening economy, the increasing cost of health care, attracting, training and keeping good employees, new foreign or private-labeled products and declining margins.

American Electric Supply's Mike Pratt has seen more end users willing to use generic products. “The contractor has become more willing to move away from the major brands on many products and has shown an interest to purchase off-shore products,” he said.

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